Week 9 - Strategic Management Accounting

Question 1

definition of strategic management accounting

Answer 1

a form of management accounting in which emphasis is placed on information which relates to factors external to the firm, as well as non-financial information and internally generated information and internally generated information

the process of identifying, gathering, choosing and analysing accounting data for helping the management team to make strategic decisions and to assess organisational effectiveness

the provision and analysis of management accounting data about a business and its competitors for use in developing and monitoring the business strategy

Question 2

4 key themes in SMA literature

Answer 2

1. product-focused and market orientated information
   
   1. approach looks at characteristics of products relative to competitors
      
      1. ask: is this bundle of characteristics competitive at a manufacturing cost no greater than rivals?
   2. product attributes include performance, reliability, warranty, and physical features
   3. products seen as bundles of attributes or characteristics
   4. compare those with competitors
   5. accountants role is to monitor performance of attributes over time
2. what are competitors doing
   
   1. collect competitor information
   2. e.g prices, costs, volumes, market share
3. gaining competitive advantage is critical
   
   1. cost leadership - exploit cost reduction opportunities
      
      1. reduction of non-value adding activities
      2. exploit linkages in value chain
      3. optimise cost drivers
   2. enhance differentiation
   3. continuous improvement referencing best-in-class competitor action
4. matching of management accounting emphasis with strategic position

Question 3

SMA - gaining competitive advantage by:

Answer 3

1. cost leadership - exploit cost reduction opportunities
   
   1. reduction of non-value adding activities
   2. exploit linkages in value chain
   3. optimise cost drivers
2. enhance differentiation
3. continuous improvement referencing best-in-class competitor actio

Question 4

typical SMA control systems, concepts and techniques used interactively with strategy:

Answer 4

• customer profitability analysis
• product life cycle costing
• benchmarking
• target costing
• TQM
• Value analysis
• value chain costing
• competitor analysis
• balanced scorecard
• activity based management

Question 5

life cycle costing

Answer 5

• analyses costs over product life cycle rather than while the product is in manufacture
• ensures the costs or R&D and end of life are considered as part of the cost of the product

Question 6

how to use value chain for cost management

Answer 6

dependent on competitive advantage

source of competitive advantage begins with a clear vision of strategic positioning of brand/product

possible advantages:

Question 7

criticisms of traditional MA tools:

Answer 7

• dependent on competitive advantage
• source of competitive advantage begins with a clear vision of strategic positioning of brand/product
• possible advantages:
  
  • cost leadership
  • differentiation
  • with or without focus

Question 8

changes to the business environment driving key SMA issues:

Answer 8

1. globalisation
2. rapid technological change
3. advanced manufacturing settings
4. changing nature of the customer
5. lifecycles

Question 9

Criticisms or traditional tools of MA

Answer 9

• Too historic
• internally focussed
• linked closely with financial accounting
• short-term in approach
• misleading

Question 10

why MASs lost relevance?

Answer 10

limited evidence that new MA techniques help enhance company performance

difficult to operationalise the proposed solutions in practice

problems of American businesses were in other structural issues rather than MASs

technical improvement won’t solve problems, TQM not problem free

problems are embedded in the genesis of MASs